Soon after COVID-19 was identified as a national health emergency, legislation was enacted aimed at assisting both employers and employees that are adversely impacted by the COVID-19 pandemic. This update focuses on the recent legislative and regulatory changes that provide temporary leave options to workers, and the financial assistance programs available for employers.
Families First Coronavirus Response Act
The Families First Coronavirus Response Act (“FFCRA”), enacted on March 18, 2020, temporarily expands the leave requirements that certain private-sector employers must provide to employees who are unable to work, including by telework arrangements, because of COVID-19. The FFCRA requires all private-sector employers with fewer than 500 employees to provide paid leave under the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act (collectively “Qualified Leave”) to employees who meet certain requirements related to COVID-19. The FFCRA allows employers to receive an immediate payroll tax credit equal to the cost of any Qualified Leave taken by their employees.
The Department of Labor (“DOL”), Department of Treasury (“Treasury”), and the Internal Revenue Service (“IRS”) have issued guidance on how to administer the Qualified Leave provisions and how employers may receive the tax credit for providing Qualified Leave. The DOL also released new temporary regulations, effective April 2, 2020 through December 31, 2020, that provide further guidance for employers concerning the FFCRA Qualified Leave requirements.
Coronavirus Aid, Relief and Economic Security (CARES) Act
The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act builds upon the federal emergency assistance provided to employers and employees by the FFCRA. The CARES Act creates additional tax payroll credits for employers, postpones the due date for payroll taxes and establishes a massive new loan program for small businesses (generally those with fewer than 500 employees) and other loan and grant opportunities to help these employers avoid laying off workers or going out of business due to the impact of COVID-19. The CARES Act also makes minor clarifications and changes to the Emergency Paid Sick Leave and Expanded Family and Medical Leave provisions under the FFCRA.
A major component of the CARES Act is the Paycheck Protection Program (“PPP”). Administered by the Small Business Administration (“SBA”) and Treasury, the PPP makes low-interest loans available to certain tax-exempt organizations (as well as small businesses and certain other entities). Loan principal (but not interest) under the PPP is eligible for forgiveness to the extent the proceeds are used for up to 8 weeks of payroll costs measured from when the loan originates, as well as certain other specified expenses. The SBA has recently issued an application, which is available on its website, for PPP loan recipients to apply for loan forgiveness.
The SBA continues to release guidance related to the PPP, which can be found on the SBA’s website. Of importance, recent SBA guidance clarifies that as part of the application process, borrowers must make a certification of financial necessity in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations. Any PPP borrower that makes a false or misleading representation on its loan application, including in connection with this financial necessity certification, may be subject to penalties ranging from $5,000 to $500,000.
The CARES Act also expanded the Economic Injury Disaster Loans (EIDL) program. EIDLs are administered by the SBA to assist small businesses, agricultural cooperatives, agricultural enterprises, and nonprofits entities affected by a disaster to help sustain business operations and working capital during a disaster recovery period. EIDLs were already available to eligible private nonprofit organizations to pay for expenses that could have been met if the disaster had not occurred, such as payroll and other operating expenses. However, the CARES Act waives several requirements that ordinarily apply to EIDL loan applicants, such as the requirement that the applicant be unable to obtain credit elsewhere and adds an emergency grant option.
The CARES Act also provides eligible employers with a refundable payroll tax credit equal to 50% of up to $10,000 per employee of certain qualified wages (including certain health plan expenses) for all calendar quarters in 2020, and postpones the due date for employers to pay their portion of Social Security taxes, with one half due on December 31, 2021 and the other half is due on December 31, 2022.
Paycheck Protection Program and Health Care Enhancement Act
The CARES Act made $349 billion in funds available for PPP loans. Since these funds were exhausted within two weeks of the program opening, on April 24, 2020, the President signed into law a second economic stimulus bill, the Paycheck Protection Program and Health Care Enhancement Act (the “Enhancement Act”), which provided an additional $310 billion in funding for the PPP and an additional $60 billion in loans and grants for the EIDL program.
Updated EEOC Pandemic Guidance to Address COVID-19
The EEOC recently updated a 2009 publication regarding an employer’s obligations
under the Americans with Disabilities Act (“ADA”) during COVID-19. An employer is covered by the ADA if it employs 15 or more employees. While the ADA generally prohibits employers from making disability-related inquiries and requiring medical examinations of employees and job applicants, under the guidance, there are a number of steps that ADA-covered employers are permitted to take to prevent the spread of COVID-19, including asking employees who report feeling ill at work (or who call in sick) questions about their symptoms to determine if they have or may have COVID-19. However, an employer is still not permitted to make inquiries about an employee’s existing medical conditions if the employee is not experiencing symptoms of COVID-19.
HHS Expands Allowable Uses and Disclosures of PHI During COVID-19
On April 2, 2020, the Department of Health and Human Services announced that, effective immediately, it will not impose penalties for violations of certain provisions of the Health Insurance Portability and Accountability Act (“HIPAA”) Privacy Rule against covered entities and their business associates for good faith uses and disclosures of protected health information (“PHI”) by a business associate for public health and oversight activities during the COVID-19 emergency. The HIPAA Privacy Rule already permits a covered entity to disclose such information, but the announcement now allows business associates to share this information without facing a penalty under HIPAA.
As Americans workers and businesses continue to feel the effects of COVID-19, we expect more legislation, regulations, rules and guidance will be released to help deal with the ongoing situation.
Please contact Slevin & Hart for more information about the legislative responses to the COVID-19 pandemic.
This publication is intended to provide general information only, and is not intended to provide legal advice. It may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm. The distribution of our publications is not intended to create, and receipt of them does not constitute, an attorney-client relationship.